Beverage Industry Looks to Cannabis for Product Innovation
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Beverage Industry Looks to Cannabis for Product Innovation

The Alkaline Water Company prepares to meet hemp legalization in the U.S. marketplace.

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January 23, 2019

One of the marquee cannabis headlines in 2018 was Constellation Brands’ $3.8-billion investment in Canopy Growth Corp. Constellation Brands makes consumer products like Corona beer and Robert Mondavi wines, and the move signaled a surging interest on the part of major beverage companies taking a close look at the cannabis industry.

Now, with the passage of the 2018 Farm Bill and the legalization of hemp cultivation and hemp-derived cannabinoids in the U.S., those same beverage companies have reason to look to American markets for hemp sources when planning, say, a CBD-infused sparkling water line.

The Alkaline Water Company Inc. is one of those businesses that’s planning next moves, and chairman Aaron Keay says that early market moves portend significant growth in this sector.

The company was founded in 2012 to quickly capitalize on the alkaline, high-pH premium water space, Keay says. Consumer demand in the earlier part of this decade was driving a lot of interest in the alkaline diet: fruits, vegetables, soy products, nuts, seeds. “In 2012, we looked at the space and alkaline itself was a diet that was getting  a lot of attention through celebrities and athletes and starting to build momentum as a healthier option on how you would consume foods [and] water,” Keay says. “Before that, alkaline was always probably thought of as a battery.”

Now, consumer trends are pointing toward the changing narratives of the cannabis marketplace. Canada legalized adult-use cannabis (and its chemical constituents) in 2018, and political winds in the U.S. are pointing to some degree of reform in the near future. Hemp legalization has certainly opened the door to regulated CBD sourcing for consumer products, like beverages.

"Once we knew ... that the Farm Bill would probably pass and that hemp and CBD would obviously in America be adopted first—and then globally—you're seeing the exact same trend {happening, and] we started to talk about a year and a half ago at the Alkaline Water Company about developing an infused beverage division,” Keay says. “I'm a true believer that there's going to be someone like a Zevia or a LaCroix that dominates the canned sparkling CBD environment. We're going to do bottles, and there's going to be pure-play water and then also there's going to be CBD-flavored water as well as sparkling flavored CBD.”

The Alkaline Water Company’s product roll-out is expected to begin in the first quarter of 2019.

And that company is not alone. According to a 2018 Brightfield Group report, the hemp-derived CBD product market is expected to outpace all other cannabis markets and hit $22 billion by 2022. For the beverage sector, this includes teas, powdered mixes, shots, sodas and bottled water.

“The consumer in the beverage area is looking for something new,” Roy Bingham, CEO of BDS Analytics, said last year

For the Alkaline Water Company, the lesson is to build on a known brand and offer consumers a pivot to an intriguing new market niche that’s drawing demand. Cannabis reform policies and outright legalization across the globe—and especially in the U.S.—will quicken the pace.

“I actually believe that the supply aspect of it is going to get easier and easier for the brands,” Keay says. “You're going to have farmers just like you do in multiple other … agricultural industries who are, because of legalization, ramping up their production, leases and acreages all over, from Montana to Kentucky. And it’s opening up in other states. You're going to see contract manufacturers open up actual facilities for things like production, extraction and licensing of certain brands. Just like you've got bottlers and canners in the beverage space, you're also going to have people that are going to be selling you their wholesale extracted product and, to me, the price is going to continue to come down.”

While sourcing is one matter, Keay says that beverage companies across the market are working on water-soluble cannabinoid nanotechnology. (Cannabinoids are fat-soluble, which presents a problem for this beverage innovation.) “Where there's going to be a very unique space in this in the category is going to be on the technology side—a nano-encapsulated water soluble [cannabinoid],” Keay says.

In late 2018, the Alkaline Water Company signed a binding agreement with Infusion Biosciences Inc. to pursue just that.